Whilst the word BANKRUPTCY sounds humiliating, has bad stigma attached and, yes, is publicly advertised this, sometimes, may be the only way out of a bad situation.

The bankruptcy order is advertised in the national papers and a trustee in bankruptcy is appointed to deal with all your assets, assets of which become the rightful property of the trustee.

The trustee will then deal with the assets as and how he sees fit maximising realisations for the benefit of the creditors.

…can make you bankrupt?

The debtor himself can petition for bankruptcy or a creditor of his/hers

In many instances a petition is served and submitted to court by a creditor. This is normally subsequent to a non satisfied statutory demand i.e. a formal request for an amount owed to be paid in full within a specified time period, the period of which is normally 21 days (if abroad the number of days depends on jurisdiction).

A bankruptcy petition can be presented against anyone, even if they are not present in England & Wales at the time when the petition is presented to court. If they are not present as at time of the petition they have to have lived in England & Wales for the past 3 years.

If a Government Department commences bankruptcy proceedings this will always be in the High Court of justice. After the bankruptcy order has been made the proceedings will be transferred to the local area of where the bankrupt resides.

…can you be made bankrupt?

Bankruptcy can occur as a result of a bankruptcy order being made by the court after a petition has been submitted.

This is normally to the non payment of a debt. The debt must be more than £750.00.

…is a bankruptcy order made?

A bankruptcy petition is usually presented either at the High Court of Justice in London or at a County Court near to where the debtor lives.

Bankruptcy is an insolvency procedure in which an individual enters into when he cannot pay his creditors.

The procedure frees the individual from all his debts, however overwhelming, and allows for a fresh start. This fresh start is subject to various restrictions, some restrictions of which are as follows.

1. Obtaining credit of £500 or more either alone or jointly with any another person without disclosing your bankruptcy.
2. Carrying on business (directly or indirectly) in a different name from that in which you were made bankrupt, without telling all those with whom you do business.
3. Forming or managing a limited company, or acting as a company director, without the court’s permission, whether formally appointed as a director or not.
4. You may not hold certain public offices. You may not hold office as a trustee of a charity or a pension fund.
5. After the bankruptcy order, you may open a new bank or building society account but you should tell them you are bankrupt; they may impose conditions and limitations.
6. You should ensure you do not obtain overdraft facilities without informing the bank that you are bankrupt, or write cheques which are likely to be dishonoured.
7. Tell your trustee about any money that you have in the account which is more than you need for your reasonable living expenses. Your trustee can claim the surplus amounts to pay your creditors.

An individual who is adjudicated bankrupt must attend the offices of an Official Receiver (OR) and provide information about their financial affairs. An OR may however choose to conduct the meeting by way of a telephone interview.

The OR is a civil servant in the Insolvency Service and an Officer of the Courts. The OR has the responsibility of administering the bankruptcy and safeguarding the bankrupt’s assets for the benefit of the creditors from the date of the bankruptcy order and will act as the Trustee of the estate until such time as an Insolvency Practitioner is appointed.

The OR also has the responsibility of investigating the affairs of the bankrupt, report to the Court and Creditors as well as report on any such matters which indicate that the bankrupt may have committed criminal offences.

The individual is also required to hand over the books and record, bank statements etc to the Trustee in Bankruptcy as well as any other financial papers/documents that they may have.

The bankrupt must report to the Trustee details of all his assets.

This is the most asked question by any individual who seeks advice as to whether they should go into bankruptcy or consider a Voluntary Arrangement.

The bankrupt’s interest in the home, whether Freehold or Leasehold, solely or jointly, mortgaged or otherwise, will form part of their Estate, which will be dealt with by the Trustee. The home may have to be sold to go towards paying creditors.

If the husband, wife or children are living with the bankrupt, it may be possible for the sale to be put off until the end of the first year of bankruptcy. This gives time for other housing arrangements to be made.

The husband, wife, partner, a relative or friend, may be able to buy the bankrupt’s interest in the home. This may be so even if that interest is very small, worth nothing or in a negative situation. Such a disposal would prevent a sale by the Trustee at a future date. The spouse or any other interested party should be encouraged to take legal advice about the home as soon as possible.

One of the reasons why it is important that the transaction relating to the property is dealt with immediately, especially where there is negative equity, as if one waits until near the end of the bankruptcy to deal with this matter, then it is possible that, with property values increasing, the bankrupt’s share of the equity could rise substantially.

If the Trustee is unable to sell the home, he may obtain a Charging Order on the interest, which must be paid from the bankrupt’s share of the proceeds when the property is eventually sold, even if the home is sold some time after the bankrupt’s discharge.

Since the Enterprise Act which came into force in April 2003 the Trustee must sell the House within 3 years otherwise the interest in the house reverts to the Bankrupt.

…does my bankruptcy end?

Generally a bankrupt becomes free from bankruptcy automatically after one year from the making of the bankruptcy order. To become free from bankruptcy is to be discharged.

This period may be shorter if the official receiver concludes his enquiries into the bankrupt affairs and files a notice in court.

On the other hand, if you have not carried out your duties under the bankruptcy proceedings, the official receiver or your trustee may apply to the court for your discharge to be postponed. If the court agrees, your bankruptcy will only end when the suspension has been lifted and the time remaining on your bankruptcy period has run.

Our experienced advisors will be able to guide you through the bankruptcy process in full and are waiting for your call to answer all the questions that you may have.

We can also advise you further on your financial situation and assist you in direction you to the best possible resolution to your problem.

Advantages

1. Quick, discharged after 1 year sometimes sooner.
2. Majority of the debt do not survive after BKY.
3. Less/No stress as there is no contact with the creditors.

Disadvantages

1. Cannot act as a director of company
2. Cannot practice as a professional
3. Cannot obtain credit of >/£500 without advising bankrupt
4. Assets automatically vest with trustee
5. IPO/IPA for 3years (if excess income)
6. Stigma of bankruptcy (advertised)
7. Credit Rating affected for 6 years
8. Cannot operate normal bank account
9. Can be investigated and pursued for transactions in previous 5 years
10. Behaviour controls outcome
11. Bankruptcy restriction orders.

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